Moody’s: $10B of Debt Due in 2016 Could Trip Up Clear Channel

By Michael Aneiro

Just when you thought credit market conditions could accommodate absolutely any company in need of debt refinancing, it seems mega-media company Clear Channel Communications could be unprepared to deal with the $10 billion mega-debt wall it’s going to hit in 2016.

That’s the take-away from a Moody’s report out this week saying Clear Channel has a manageable amount of debt coming due through 2015 but will struggle to refinance the $10 billion of debt that comes due in 2016 without facing some sort of restructuring. From Moody’s senior analyst Scott Van den Bosch:

Under our base case the company’s ability to avoid restructuring will be challenging as debt levels will exceed our expected asset value. The possibility of a restructuring or a distressed exchange remains high. Efforts to avoid a restructuring and refinance or extend its debt load will likely depend on the receptivity of the financial markets and moderate underlying interest rates.

In our downside scenario the company is likely to face a restructuring of its balance sheet in excess of $16 billion in debt.

By way of clarification, which is needed for a company with such a large and complex balance sheet, Clear Channel Communications, Inc. (CCU) owns 89% of Clear Channel Outdoor Holdings Inc. (CCO), but CCO is not a guarantor to CCU’s debt, which only has a claim on the equity of CCO‘s outdoor assets. CCU is owned by private equity firms Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. which bought the firm in a 2008 leveraged buyout.

Moody’s points out that the variance between its downside and upside revenue assumptions is not large, but the results lead to very different outcomes for Clear Channel, “illustrating just how sensitive the company is to changes in performance and economic growth over the time period.”